Tuesday, 21 April 2009

Negative Inflation?

Have a look at this headline in this article:

http://news.bbc.co.uk/1/hi/business/8009718.stm

Quite straightforward you might think: the inflation figures have gone negative for the first time in decades. We've been taught since the late seventies that inflation is bad, so negative inflation is good isn't it?

Well, no. You see, these figures take a while to come out, so what you're seeing is a snapshot of prices a few months ago and yes, store chains were closing and prices were being slashed and petrol was at its lowest price.

But what's happened in the last month? Petrol prices have started to rise. It was at its Lowest in January, it crept up February then there was a 5 week hold During February and March. It then started to climb again. This time with a weak pound driving the price, and no recessionary pressure to hold it back.

Food prices have started to firm up again too in the past few weeks as well.

So who do you believe? Statistics and headlines stating the results of 3-month old data, biased to make you feel good ahead of the budget, or your own experience, right now?

Do you believe the BBC, who will highlight any glimmer of news indicating a return to the good old days (like the news of rising house prices the other week), or your own experience of a tough housing market, people being repossessed and food prices increasing?

Do I believe the government's jobless figures, or do I go on my own personal experience where in December there were 6 people waiting to be seen at the same time as me at the jobcentre, but now there are 3 times that?

I'm going with the empirical data.

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